Dive Brief:
- In response to China's retaliatory tariffs on $34 billion of U.S. goods announced Friday, the U.S. has announced 10% tariffs on another $200 billion of Chinese imports, the U.S. Trade Representative (USTR) said in a statement.
- After the announcement, the Chinese government said it would take "firm and forceful measures" against the tariffs but did not provide specific details, according to the Associated Press.
- The USTR is accepting comments and will hold a public hearing August 20-23. If approved, the earliest the tariffs would go into effect would be August 31.
Dive Insight:
With each tariff in response to other tariffs, the U.S. and China are spinning themselves further into a trade war.
The U.S. tariffs were originally aimed at China's "abusive trading practices with regard to intellectual property and innovation," USTR said. But the latest list of goods includes a wide range of products, including several food products, tobacco, pesticides and luggage.
The concern with tariffs on an additional $200 billion in imports is if China wants to retaliate with tariffs of equal measure, it is running out of U.S. imports. In 2017, the U.S. imported more than $505 billion from China, but exported only $130 billion to the country, according to Census Bureau data.
The trade imbalance has prompted fears among global businesses of what shape China's "firm and forceful measures" would take, as it cannot be a direct retaliation on $200 billion of imports. With tariffs of $34 billion and potentially another $16 billion already announced, China has only about $80 billion of U.S. imports remaining to tax.
The measures could result in China attempting to disrupt operations of U.S. companies with a presence in China, AP reported. For example, Chinese regulators could delay or deny licenses or launch investigations on American businesses.
China could even extend its measures to consumer boycotts or limiting visits to the U.S. by Chinese tourists, according to Reuters, which could carry significant impacts to the U.S. economy. In 2016, nearly 3 million Chinese nationals visited the U.S. and spent $33 billion.
Retailers are particularly concerned as the height of the trade war is coming during the pre-holiday season. Not only are businesses under stress to prepare for months of busy commerce and the logistical challenges that ensue, but they're also forced to rethink sourcing as more of their goods face the possibility of duties.
